April 30, 2012

Cunliffe shores up the base

Yesterday David Cunliffe gave a speech to the New Lynn branch of the Labour Party, ostensibly about economic development (his portfolio) but it is an overt challenge to Shearer and a signal of where Cunliffe would take the party if he was in charge. The speech is a critique of neo-liberal economic policy, wedded to a revisionist theory that voters didn’t support Labour in 2011 because they were a party of neo-liberalism (even though they actually ran on a very left-wing policy platform, mostly copied from the Green Party.)

When the right-wing party says that it’s going to cut your leg off, voters want the left-wing party to say that it’s not going to cut your leg off. Voters don’t want to be told that the left-wing party is also going to cut your leg off, but cut it off a bit lower down and give you some anesthetic.

It’s a very good speech. Cunliffe has only posted it to Facebook, so I’ve reproduced it here below the fold.

Speech to the New Lynn Women’s’ Branch, New Zealand Labour Party, 29 April 2012

David Cunliffe, MP for New Lynn, Labour Economic Development Spokesperson.

Introduction

You know that at the last election, the one that we lost so badly, nearly 1 million people didn’t vote. Over 800,000 people: a fifth of the population didn’t vote.

Now you know, there are lots of reasons that people didn’t vote, and there were even more reasons why people didn’t vote for Labour. Let me give you just a few.

The major reason that voters didn’t vote for Labour, and sometimes didn’t vote at all, is simply that Labour failed to inspire voters that it was a credible alternative to National.

This is the first of a series of speeches on economic development. I am going to start with the basics – why the invisible hand of the market failed us and why we need a clear and distinct Labour view on economics; why you can’t cut and sell your way out of an economic hole; and what a Labour economic development plan should contain. We need to be clear about the context before we can go on the policy journey.

I want to be clear from the outset that this speech represents my own views and does not pretend to represent overall Labour policy. All policies are being reviewed in the post-election period.

The Invisible Hand

The Labour Party was traditionally a left-wing party. Before we debate the future of the Labour Party, we should define what the terms left and right-wing mean.

Left-wing generally means community ownership and or control and/or responsibility.

Right wing means individual ownership and/or control and/or responsibility. By modern standards, even the National party would have been a left-wing party until the 1990s. That’s because most New Zealanders accepted the idea that the government has not just a right, but also a duty to be there for them.

New Zealanders wisely accepted that finance companies needed regulation. New Zealanders wisely accepted that it was the government’s job to ensure that the electricity didn’t go off. They wisely accepted that it was the government’s job to ensure the children didn’t grow up in poverty, that medical care was available for people who needed it, that decent housing was available for the poor and the elderly.

However, by the 1980s, the New Zealand economic system had grown clumsy and slow. Most people agreed that it was in need of reform. That’s what most people wanted, economic reform. That is, they wanted the existing system, but they wanted it to function more smoothly, more efficiently and more fairly. They did not want it replaced with a system that simply handed over most of the wealth and power to rich people.

Yet, that’s what happened, and to our eternal shame, the Labour Party was the party that introduced many of the so-called economic reforms that have proved so disastrous.

The National Government that followed it took the experiment further; with the ‘Mother of All Budgets’ that savaged social services, more privatization and deregulation, and the odious Employment Contracts Act that set us on the path of becoming a low wage economy.

You hear the National government talking about the need to sell assets because we have so little money in this country. Do you know why we have so little money in this country? It’s because a large percentage of our economic assets are overseas-owned. For example, when the Australian-owned banks make billions in profits here (and it’s up a quarter to a third this year alone). That money isn’t returned to New Zealanders. The money goes straight back overseas.

And, as if that were not bad enough, the National government now wants to sell our other major state assets, which is simply going to mean higher prices for ordinary New Zealanders and it’s going to mean still more profits disappearing overseas. It’s madness, and you know it’s madness and most ordinary Kiwis know it’s madness.

But let’s go back a bit.

I know that most of the people in this room think of the 1970s as a period of long-haired hippies and revolution. However, beneath the events that were happening on the surface, there was a much more sinister revolution going on in the background.

While the hippies were out protesting in the streets, a professor at the University of Chicago called Milton Friedman, was selling his students the idea that taxation was evil and that businesses worked best when they were deregulated.

Does this sound familiar? It should be. The Republican Party in the US, the Conservative Party in England and the Labour Party in New Zealand enthusiastically took up Friedman’s philosophy, which is now called neo-liberalism. Neo-liberalism has become such a dominant economic philosophy that it is now the only economic philosophy taught in many universities.

Friedman revived a belief in the “invisible hand” of the market. It was a fairy tale that Adam Smith had said a century earlier would automatically deliver the best of all possible economic worlds.

Of course many of the rogues who benefited from it have never believed that – they remember how they got rich. However, neo-liberalism was a convenient way of selling the idea of inequality to the masses.

Hands off our assets!

Let me repeat, none of this happened by accident. The people who were the most enthusiastic supporters of neo-liberalism were the people who stood to make the most money from it. Let me give you just one example:

In the 1980s and 1990s, merchant bankers Michael Fay and David Richwhite were advisors to government.

Michael Fay and David Richwhite recommended that the government sell the state-owned New Zealand Rail.

The government agreed and put the company up for sale. Fay and Richwhite and some partners, then purchased New Zealand Rail at a bargain price.

That’s right: Michael Fay and David Richwhite, the consultants that government hired to advise them on state asset sales, advised the government to sell New Zealand Rail, then Michael Fay and David Richwhite bought a large chunk of New Zealand Rail.

The story gets worse: Fay and Richwhite and their partners then sold many of New Zealand Rail’s most valuable assets, such as land, without improving the company as a true rail operator would.

Then, in 1995, Fay and Richwhite sold their shares in New Zealand Rail, having made hundreds of millions in profits. Because Fay and Richwhite had sold many of New Zealand Rail’s most valuable assets without investing in trains or tracks, New Zealand Rail was virtually bankrupt.

The government was then forced to spend hundreds of millions of dollars of taxpayer money to keep the rail service operating. Does this sound crazy? It is.

This sort of madness has been repeated all over the world, and it’s always the ordinary taxpayers like you, who end up paying the bills.

Roll the clock forward to the current National Government and nothing has changed except the packaging.

They can try to soft-soap it by calling it the “mixed ownership model”. But you and I and the 10,000 other New Zealanders who marched up Queen Street yesterday to fight it – know it is still privatization.

We know why privatizing our power companies is nonsense.

Generations of Kiwis worked to build up those assets and we don’t need to be told we have to buy them all over again. That’s assuming we could afford them of course.

The fact is that when sold, they will not be state owned enterprises covered by the SOE Act at all – they will simply be companies like any other – in which the taxpayer has a much reduced shareholding.

We know they make a healthy return for the taxpayer now. In fact, over the last three years the total return was around 16% – far higher than the cost of Crown capital at around 6%.

They pay good dividends –over $300m a year for the last four years. But the Government deliberately failed to show that in the Budget documents when it banked the supposed sale proceeds well before the last election.

To complete the hypocrisy, the government is now saying the loss of dividends is so low that no sane buyer would pay the money they want without driving your power prices through the roof.

National tried to buy iwi support by saying treaty rights would be protected. I doubt this, but even if true it would mean the taxpayer bears 100% of that risk including on behalf of the new private investors.

Yet the biggest porky of them all – that the government would retain majority ownership and control. Yeah right. Not when SOEs like KiwiRail are already busy flogging off major components like Hillside Workshops. Not when SOE bosses told Parliament they are free to sell off 100% of subsidiaries.

In other words, the SOEs are like a horse. The government intends selling the horse off bit by bit, leaving the taxpayer owning nothing more than the saddle.

The fact is, this is old fashioned privatization with new spin and the same old result. The people lose. The ticket clippers win (it costs up to $300 million in banker fees to sell the shares!). And the voter is told to “eat that”.

So how do these rogues get away with it?

The answer is twofold: on one hand, the news media has been a solid supporter of neo-liberalism.

Did you know, for example, that British Labour Prime Minister Tony Blair, regularly lunched with Rupert Murdoch, the far-right media boss? Tony, apparently, used to test which policies would be acceptable to Murdoch.

Thus we have a far-right media boss influencing the policies of what was supposed to be the party of the people. It’s shameful.

The second reason these rogues get away with it is because, as the Tony Blair example shows so clearly, the opposition parties, which are supposed to be the solution, too often become part of the problem.

When the right-wing party says that it’s going to cut your leg off, voters want the left-wing party to say that it’s not going to cut your leg off. Voters don’t want to be told that the left-wing party is also going to cut your leg off, but cut it off a bit lower down and give you some anesthetic.

I think that’s a major reason that nearly one million voters deserted us at the last election. It wasn’t because we failed to communicate our policies. Quite the opposite. Those voters saw that our policies – with the exception of asset sales – were mostly the same as National’s. So we can’t really be surprised at the result.

Towards a New Economy

So where to from here? Let’s be absolutely clear – New Zealand cannot cut and sell its way to National’s so-called “brighter future”.

National has no new ideas and no credible plan. It has laundry lists of actions, many of which take us in the wrong direction.

The reason is that they still fundamentally believe that some combination of the “invisible hand” of free markets, and the “sleight of hand’ of dirty deals with casinos, dotcoms, film and media magnates, and telcos, will do the job.

The good news, if you can call it good news, is that the economic myths that drove the world into this current mess are starting to unravel. Let me quote economics writer Bernard Hickey, who regularly contributes to the New Zealand Herald:

“It’s time for me to say what I’ve been thinking for months: the economic god of completely free markets and capital flows is not worth believing in any more.

I think the Global Financial Crisis …has demonstrated the failure of the economic model most New Zealand policymakers have adhered to for nearly 3 decades.

I think we need to rethink the way we run monetary policy, the way we allow foreign ownership of assets, the way we encourage savings, the way our financial institutions are regulated and [to] change the things we are aiming for.”

All around the world, this realization is sinking in: the unregulated marketplace has been a disaster, and the costs have always been borne by ordinary people.

Europe’s current economic crisis was caused by bankers who loaned money on riskier and riskier ventures until the whole structure collapsed.

Were those bankers jailed and their assets seized? Of course not. Instead of the bankers paying the bills for their reckless speculation, the ordinary taxpayers are being screwed, left, right and centre.

And you know what? Despite all the promises that the European economic austerity measures would turn this tragic situation around, the opposite is occurring.

Austerity economics does not work. It did not work in the Great Depression of the 1930s and it will not work in the Great Recession of the current decade.

When you start closing down your government services and firing your workers, those people have no money to spend. Because they have no money to spend, the local businesses suffer. So they start firing staff. And so the economy goes into deep recession, with no easy way out.

Am I the only one who thinks this is complete lunacy?

You know, these problems that we face today stem from a lack of appropriate regulation or a lack of enforcement of existing regulations.

The global financial crisis was caused by unregulated banking. Leaky building syndrome was caused by deregulating the building industry. The Pike River mining disaster has raised numerous questions about deregulation of the mining industry. Does anyone still seriously believe that big business can be safely left to regulate itself?

Yet, regulation has become a dirty word.

Do I favour regulating the lives of ordinary New Zealanders? Certainly not: I have great faith in ordinary New Zealanders.

Do I favour supporting positive businesses? You’re damned right I do. Businesses help create jobs and economic growth. I want to see a future Labour government get stuck in and do more to help the economy grow.

Do I support all businesses? No way. Businesses that let workers die unnecessarily, or abuse and exploit their workers, or steal from old people: all these business need a strong, legal response from the state.

All this requires regulation, and it’s there to protect ordinary people from becoming victims of greed.

Labour is strong on encouraging positive business and positive economic growth. And Labour is also about legislating to control negative businesses and their effects on our people and our environment.

Caught between a naïve belief in free markets and direct pressure from vested interests, National is unwilling to confront the downsides of unregulated markets.

Fortunately we’re not. And an increasing number of journalists and politicians are saying what ordinary people already know: that the economic policies of the last 30 years have mostly been an unmitigated disaster.

But you’d never know this if you listened to John Key. Like a quack doctor whose cure has failed, his response is to double the dose until the patient is dead.

Sorry, John, but let me quote Sir Winston Churchill:

“The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.”

No matter how many politicians and economists still defend the economic policies that led us into this mess, the truth is steadily showing itself.

You know, there’s not much difference between a Wellington school teacher struggling to find an affordable home and a Northland freezing worker who’s just lost his job. Whether we earn our living by our hands or by our words, we’re all working people, whose lives have grown harder and whose world has grown steadily darker. We’re all in this together.

We all resent those who squander our tax dollars by helping out large corporations, while we struggle to pay our mortgages. We all resent those who seek to sell the very state assets that help keep us afloat. We all resent those who claim to represent us in Parliament, but who really represent the rich and the powerful, at our expense

Instead of National’s failed economic model, we need a simple, credible economic development plan that serves the interests of all New Zealanders.

One that keeps more of what we earn here in the country we love.

Conclusion

I believe the Labour Party is now uniquely positioned to take up the reins when this current government’s policies collapse under their own weight.

Labour has a new leader with strong values, who’s focused on reconnecting with the voters and has the courage to stand up to bullies. It’s up to us, as a Party, to share with our leader, our hopes, our fears and our dreams, to reconstruct the Party from within, to reclaim our natural constituency of decent, ordinary New Zealanders who believe in fairness and hard work.

Now it’s up to us to turn this around: a hard task, but not an impossible one.

When Labour proposed a nuclear-free policy, it was seen as an impossible dream. Yet nearly thirty years’ later, this dream is a solid reality, and it’s helped protect us from the sort of nuclear disaster that Japan has just endured.

The New Zealand Labour Party faced enormous pressure, from inside and outside New Zealand, to back down and change its anti-nuclear policy.

But we didn’t. And we don’t have to back away from creating policies that can turn us away from the economic insanity of the last three decades. New Zealanders are decent, fair-minded, hard-working people. We want a government that reflects our own uniquely Kiwi values.

It’s going to be hard, but we’re not afraid of hard work. With your help, and the help of the people of New Zealand, we can win the next election.

We can move forward to a future that rewards hard work and stops rewarding dishonesty. That gives the poorest of our citizens the chance to a decent life. That gives us all a chance to live in a nation that was once called ‘God’s own country.”

another speech on how Labour will be so different from National but nothing to indicate what that difference might actually be.

Left-wing generally means community ownership and or control and/or responsibility.

That would make private schools left-wing. Dear lord, reductionist definitions, great start. I bet he then moves on to say that there are Goodies and Badies and that Labour is a Goody. No need fo all that nonsesne about how there might be leigitimate disagreements over complex issues.

Labour has a new leader with strong values, who’s focused on reconnecting with the voters and has the courage to stand up to bullies.

From a party with likes of Mallard that’s a bit hard to take.

We can become God’s own country again.

Does this ancient platitude really have that much emotional weight anymore?

He takes a swipe at crooks like Fay & Richwhite and the ignorant, troughing politicians that bought their snake oil.
He has a go at the vested interest and regulatory capture, and the way in which backroom crony deals ensure the taxpayers foot the bill when public assets get looted.
He has a go at bankers getting a free lunch

All fair enough.

I’m no fan of Friedman but so say Cunliffe states he was “selling his students the idea that taxation was evil and that businesses worked best when they were deregulated”.

This is pretty simplistic.

Friedman was pretty specific about deregulation (to the point of being absurd – deregulation of medicine for instance) but absolutely supported some areas of natural monopoly as opposed to technical monopoly (i.e legislative) in areas where public good made sense.
He was also a proponent of a negative income tax to replace welfare and effectively provide a universal living wage.
As a monetarist his ideology would not support easy credit and the free lunch being handed to bankers.

So while neo-libs might claim Friedman as their own, they definitely cherry pick his ideas.
Cunliffe is essentially guilty of the same thing, so while this speech might be a critique of neo-lib policy, it is at a fairly superficial level.

To really propose an alternative, Cunliffe would have needed to position an antithesis of either Keynesian economics or some other model (though this probably wasn’t the speech for that, I’ll admit).

Brilliant speech. Well-pitched, succinct : ” No matter how many politicians and economists still defend the economic policies that led us into this mess, the truth is steadily showing itself.” We’ve been waiting a bloody long time for those rewards to trickle down and I reckon we’re done waiting.

“The speech is a critique of neo-liberal economic policy, wedded to a revisionist theory that voters didn’t support Labour in 2011 because they were a party of neo-liberalism (even though they actually ran on a very left-wing policy platform, mostly copied from the Green Party.)”

And thats why Cunliffe won’t be the Saviour.. he starts his campaign with a lie. The way he’s positioning himself looks more like Jim Anderton and Winston before they split from their respective parties.

True that, Merv. Good call. It’s not like Cunliffe is actually killing and mutilating government ministers or anything useful. Although one could argue that making speeches is actually a pretty good thing for an opposition spokesman on economic development to be doing right now…

“…wedded to a revisionist theory that voters didn’t support Labour in 2011 because they were a party of neo-liberalism (even though they actually ran on a very left-wing policy platform, mostly copied from the Green Party.)…”

Except that while the policies were left wing(ish) the party was still seen as neo-liberal. The disconnect with the voters was between a party that appeared not to believe in it’s heart the policies it was expousing and voters who instinctively sensed that lack of enthusiasm.

Reading Cunliffe’s speech it at least mentions the ideology that dared not speak it’s name for the last 30 years for Labour parties in the English speaking world – socialism, or even just social democracy. But while he acknowledges the grip of neo-liberalism he does so without really grasping it’s power or the nature of its response to a direct challenge. I do wonder if Cunliffe (or any other mainstream left wing politician) has the cajones to really take on this latent power.

Cunliffe notes the political power of Murdoch in the U.K. The Leveson inquiry has enthralled us all with it’s glimpses of the influence exercised by the Murdoch press, and the extent that Murdoch used the ambient power of the political/media nexus he created to exercise a form of political blackmail on the political class in the U.K. that turned the entire British state into his self-censoring whore. Sure, Murdoch is seeing his empire wane for the time being. But without serious regulation it will eventually wax again. Would a NZ Labour party really enact the media ownership law reform required to negate the neo-liberal press? Remember, the setting up of Radio New Zealand in the first place was to allow the first Labour government to get its message out over the heads of the virulently anti-Labour establishment newspapers of the time, so it isn’t like they haven’t done it before.

Similarly, the idea in his speech that we might not have to abjectly and uncritically worship at the feet of business is a direct challenge to the hegemonistic primacy of business that dominates our civic discourse. Cunliffe notes that neo-liberalism is often now the only economic theory taught in universities (that a crackpot like Eric Crampton can be a senior lecturer is evidence enough of that) but as in the media, the ambient groupthink of neo-liberalism infests every corner of our business establishment. If Cunliffe is for real, he is going to have to have plans to deal with a capitalist class that would respond to any attempt to reign it in with “capital strikes” and “capital flight” and black propaganda campaigns that will make the manipulation of public opinion we saw in the Hobbit dispute look like a beacon of truth and light. Until I see more evidence that the move to proudly embrace social democracy again comes with the willingness to take on capitalism’s response, I’ll reserve judgement on him.

I don’t think Cunliffe’s theory for voter apathy is “revisionist”, National and Labour economic policies have been practically indistinguishable for a long time. I know many people who are sick of neoliberalism turning this country into a plaything of the rich, while the rest of us a working twice as hard to stay afloat. That is surely a reason to give up on voting. Phil Goff’s brave last-minute lurch to the left was probably a bit too late, there was definitely a good response to the policies, but not much faith in Goff (a former Rogernome).

“When you start closing down your government services and firing your workers, those people have no money to spend. Because they have no money to spend, the local businesses suffer. So they start firing staff. And so the economy goes into deep recession, with no easy way out.

Am I the only one who thinks this is complete lunacy?”

This is a bizarre strawman. Neither is the government closing down government services, nor are we in a deep recession. What is he talking about specifically? Southern European austerity?

“Fortunately we’re not. And an increasing number of journalists and politicians are saying what ordinary people already know: that the economic policies of the last 30 years have mostly been an unmitigated disaster.”

What exactly is this guy proposing? I am getting a little scared by this to be honest.

Quite why he thinks it is the govt’s job to “support” business, I don’t know: surely the role of govt is to support my rights?

If by ‘rights’ you extend it to be the right to live in a functioning society with a healthy mixed economy and ‘supporting’ businesses that are good corporate citizens (i.e.don’t defraud, coerce, poision or otherwise harm citizens with their products), then the ideas aren’t necessarily exclusive.

Like the anonymous first commenter, I struggle with “it is an overt challenge to Shearer.”

Cunliffe is the finance spokesman and a senior MP. It’s not exactly unexpected for him to talk about finance policy and do a good job of it. A leader who required his or her spox to give bad, content-free speeches would be a pretty poor leader. And what if Cunliffe had given the opposite speech, a poor vague one praising the status quo — woudn’t that be undermining through wilful non-performance?

I can’t live without food, I can live (sorta) without electricty. So why does govt not get involved (beyond regulation) in the production and distribution of food? Instead, they leave it to the invisible hand of the market to feed us.

So why does govt not get involved (beyond regulation) in the production and distribution of food?

Weird comment. As a major food producer the NZ Govt is all over the industry (MAF, Food Safety Authority, Ministry of Transport, MFAT). Clearly the invisible hand isn’t sufficient for such a critical industry

“I can’t live without food, I can live (sorta) without electricty. So why does govt not get involved (beyond regulation) in the production and distribution of food? Instead, they leave it to the invisible hand of the market to feed us.”

I wonder whether this is what Cunliffe is getting at though – nationalise the farms – A Ministry of Food.

So why does govt not get involved (beyond regulation) in the production and distribution of food? Instead, they leave it to the invisible hand of the market to feed us.

Who set up Fonterra? (though I guess that is regulation)
Who builds the roads to transport the goods from producer to market?

A pretty big catch excluding regulation anyway.

Without regulation, the invisible hand wouldn’t exist. It’s dependent on trust.
People don’t spontaneously have complete and accurate knowledge of any given market.
Legislation like the Food Act 1981, the Fair Trading Act 1986 and the Crimes Act 1961 enforce the conditions whereby trust can be inferred without the need for the consumer to directly negotiate or develop said trust with any given supplier of goods and services

Sliver of hope? Can never get that right. But to me the issue is clear. Cunliffe is ten times more articulate and probably a lot more intelligent than Shearer. If you think this speech was simplistic, go back to Shearer’s lamb speech. Referring to God’s Own was perfectly appropriate in the context: compare it to “a new New Zealand.” (There’s nothing wrong with a bit of nostalgia for an egalitarian past????)

I wonder if this would have been the speech were he leader, and not Shearer. As a vision its not bad, but Cunliffe isn’t even leader of the opposition, so its not like he wields any actual power to implement any of this as Labour policy.

GW@34: part 1 (sorries!):
“Who set up Fonterra? (though I guess that is regulation)” The farmers I believe. In the olden days they cooperated without worrying about the government.
“Who builds the roads to transport the goods from producer to market?” Um, that’s not ACTUALLY the food, though, is it? Roads is what most of us can agree (except the libertarians) is a worthwhile govt function.
“A pretty big catch excluding regulation anyway.” Duh: that’s my point, to distinguish between REGULATION and PARTICIPATION. Govt participates in all sorts of service provision that arguably could be left to markets: AirNZ, railways, banking, electricity.
“Without regulation, the invisible hand wouldn’t exist. It’s dependent on trust.” Yep, it’s dependent on trust. Trust probably existed before govt, but that depends how you define govt. Our cavemen ancestors may have expanded trust beyond the family to nearby families without a govt. If, in trade, one family did a dirty over another, there would be consequences. Just like under the current system where we do have govt: some of those consequences involve govt (courts, enforcement of contracts, etc.) or may not involve govt: the injured party simply declines to work with the guilty party ever again.
“People don’t spontaneously have complete and accurate knowledge of any given market.” Who said they did? When I went out to buy a large plasma screen, I had to do a bit to research around prices & features, etc. But it got to a point where I thought “I’ve been to about 4 different websites and 2 stores, so although I don’t know EVRY retailer’s price, I have enough knowledge to be happy to pay the price for this tv, here. Iguess the govt, in some misguided attempt to give me complete knowledge, could set up a website and require every retailer to register their range and prices on it. I gather they tried that in Aussie in relation to grocery prices: it turned out to be unworkable, not to mention unwanted (by the taxpaying public). So we all understand (I believe) that when we go to market, we don’t just accept the first deal that comes a long: we do a bit of research and we talk to our friends.

GW@34: part 2:
“Legislation like the Food Act 1981, the Fair Trading Act 1986 and the Crimes Act 1961 enforce the conditions whereby trust can be inferred without the need for the consumer to directly negotiate or develop said trust with any given supplier of goods and services” Really? So after a food outlet has a run of food poisoning, why is there a drop off in trade? Answer: due to a lack of trust amongst consumers. This distrust arises in spite of the regulations. We all use discretion when selecting a dining establishment. In fact, in some situations, regulations inspire false trust. Just look at deposit guarantees in the US, building regulation in NZ. Yep, I know you all say it was due to a LACK of regulation, but it really wasn’t: it was poorly designed regulation and industry capture that caused leaky buildings. After all, all those homes were inspected at several points by government inspectors (councils) during construction, issuing materials and processes that were approved. Buyers relied on the “trust” created by the inspections and the building codes. http://www.branz.co.nz/aboutus (industry & govt working hand in hand: “The Building Research Levy Act 1969 authorises the levying of building contractors to provide money for research into improved techniques and materials for use in the building industry.” Great, even those experienced practitioners who thought the new ways were madness, probably had to contribute to the cost of the madness!)
“Legislation like… etc., etc… enforce the conditions whereby trust can be inferred without the need for the consumer to directly negotiate or develop said trust with any given supplier of goods and services” No it doesn’t: it provides mechanisms for resolution of disputes when trust is broken. And trust is broken all the time, but many businesses go above and beyond the legal minimum: look at (for example) New World’s “200%” guarantee. I don’t trust the Toyota brand due to regulation, but to years of them being trustworthy. Their recent recalls reduced the level of trust, but their hard work (and not govt regulation) will be what restores the level trust in the future.

It is entirely possible that certain bloggers will vent their prejudices, gleefully, on this speech and praise John Key and/or denigrate David Shearer.

Interestingly enough the reaction seems to be to praise Key while rushing to Shearer’s defence.
According to John Pagani’s role model David Farrar, Shearer’s such a nice chap who only wants the best for NZ. Horrid Cunliffe.

Re roads: Your original premise “So why does govt not get involved (beyond regulation) in the production and distribution of food? Instead, they leave it to the invisible hand of the market to feed us.”

I didn’t suggest govt is directly involved in food production, but pointed out your error in suggesting the state has no role in distribution.

Re regulation as a proxy for perfect market knowledge: The point I was trying to make (probably poorly) is that regulation in some ways acts is a proxy, not a replacement, for some of our decision making. It allows people to infer or assume trust – trust that they won’t be poisoned or ripped off – without the buyer needed to develop that trust over time and further, the buyer feeling assured that standards exist to ensure safety and freedom from fraud.

These are good things from a market perspective as they (should) allow the market to operate more efficiently.

In other words, when you go to the dairy for a packet of chips, you don’t need to have detailed knowledge of the producer practices and food quality / safety standards before purchasing. That trust is inferred from a combination of active trust (branding) and passive trust (regulation).

Obviously, this is more prevalent for small purchases like FMCG food items where there is more demand elasticity (and hence, less thought put into the purchase) than in big ticket purchases where you might do your research.

Without regulation, the invisible hand wouldn’t exist. It’s dependent on trust. People don’t spontaneously have complete and accurate knowledge of any given market.

The is an incredibly poor objection. The government does not provide people with complete and accurate knowledge of the market and functioning markets do not require complete and accurate knowledge.

Markets emerge spontaneously and they logically and empirically predate states, operate outside state enforcement, and do not require states to function. States don’t facilitate markets. States inhibit and distort markets.

Like David Cunliffe, Gregor it seems you have a hard time engaging intellectually with those who hold a different view to your own.

Regarding the invisible hand here is a quote:

I find myself more and more relying for a solution to our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.

Like David Cunliffe, Gregor it seems you have a hard time engaging intellectually with those who hold a different view to your own.

How do you figure that, QtR? Is holding a contrary opinion somehow indicative of an inability to engage?

Markets emerge spontaneously and they logically and empirically predate states…

I’m not disputing that, but even Hammurabi enforced statute relating to trade.

States don’t facilitate markets. States inhibit and distort markets.

Maybe not all markets, for example, face to face transactions, but your first statement does not hold water. States obviously facilitate markets as per examples given (i.e. roading, consumer legislation). The second is ideological rather than substantive.

“Throughout history, Adam Smith observed, we find the workings of “the vile maxim of the masters of mankind”: “All for ourselves, and nothing for other People.” He had few illusions about the consequences. The invisible hand, he wrote, will destroy the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.” It will destroy community, the environment and human values generally — and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces.”

Markets emerge spontaneously and they logically and empirically predate states…

true, people can’t help but barter, but there always was a mechanism by which contracts were enforced. pre-state communities policed cheating. In small communites that could be done without a “state” since everyone knew each other and could keep track of who had agreed to what. But in larger systems, as Gregor W above mentioned, individuals often cannot mediate directly and require an extrenal agency that can be trusted upon to enforce contract law, ownership rights etc.

true, people can’t help but barter, but there always was a mechanism by which contracts were enforced. pre-state communities policed cheating. In small communites that could be done without a “state” since everyone knew each other and could keep track of who had agreed to what. But in larger systems, as Gregor W above mentioned, individuals often cannot mediate directly and require an extrenal agency that can be trusted upon to enforce contract law, ownership rights etc.

Such enforcement of contracts need not by a state as history can amply demonstrate from the first stock market in 17th century Amsterdam, the emergence of the London Stock exchange, the medieval law merchant, to international arbitration associations today which provide resolution for most contract disputes in international trade today.

Anthropological evidence of the oldest human commerce suggest barter was never how it was done, and contracts definitely weren’t needed. In a small stone age settlements, trade was primarily done on credit. You made or had something, and someone came along and expressed an interest in it. If it was surplus to your own needs, you offered it to them outright. You would remember this, and most likely everyone else in the group would notice. Typically, people would reciprocate later, giving back some of their own surplus, whatever it was, probably in response to an expression of interest. So if someone was good at making spears, they might have a spare one that you ask for. They give it to you. Maybe later that week, you’re seen carrying something you caught, and the spear maker asks if they can have some. At this point you’re all square. Other animals also do this – the idea of barter is a fair way down the evolution of commerce.

This works well for groups up to about 120 people, apparently. After that, there are too many people to remember, and records start being kept, although credit may still be how it is done.

People who were known not to reciprocate would not be offered anything, until they changed their ways. If you don’t feed a dog that is hanging around and barking at predators or strangers, it will eventually leave.

“The only “rights ” you have are what the society you live in allows you to have.”pLp @43.
Do you mean to sound so chilling: I take your “society” to mean “your current term of parliament”.
Rights are what we should have whether or not our govt deems us worthy of having them. Anything else is mob rule. Just think about homosexuality: “society” in ANY form did not want to extend normal rights to them, but the right thing was eventually done and homosexuality was decriminalised.

Gregor W @ 48 : “The Dairy Industry Restructuring Act 2001 allows Fonterra to exist”
I’m sure that antecedent components of Fonterra have been around a lot longer than 2001! “The first dairy co-operative was established in Otago in 1871” http://en.wikipedia.org/wiki/Fonterra
I don’t have any knowledge of the history, but I suspect that the enabling legislation was required as the proposed new giant combination would not have been allowed under Commcere Act?

56.Anthropological evidence of the oldest human commerce suggest barter was never how it was done, and contracts definitely weren’t needed.

I suppose initially it was reciprocal gifting, sometimes willingly, sometimes not. But as we specialised, blacksmiths, millers etc, this had to morph into barter/trade and along with that our sense of reciprocal transaction morphed into contract.

I’m sure that antecedent components of Fonterra have been around a lot longer than 2001!

Sure. But your premise was “So why does govt not get involved (beyond regulation) in the production and distribution of food?. Instead, they leave it to the invisible hand of the market to feed us.

All I’m saying is that Fonterra would not exist without legislation and they definitely do produce food, which to a degree negates (along with the point about roading) your position that ‘the invisible hand’ magically sorts everything out.

And yes, you are on the money wrt the Commerce Act, specifically competition law.

@ Ben

If you don’t feed a dog that is hanging around and barking at predators or strangers, it will eventually leave.

Finally, a viable strategy to get rid of both Peter Dunne and John Banks. Congratulations, Sir.

“I think the idea of having a contract with a dog is silly.” Indeed, I was thinking more about the stone age men (and women). Perhaps Mr Geddis can define a contract for us!

“All I’m saying is that Fonterra would not exist without legislation ” Of course it might, but granted not in the same form and not with the same ability to override otherrights and regulations. Plenty of farmers share facilities such as milking sheds (or so I’m told), not because legislation requires it or facilitates it, but because the farmers think it a good idea and legislation does not specifically ban it. So Fonterra can get out of provisions of the commerce act because the govt UNbanned the behaviour in their case*. And the invisible hand is still there: farmers are free to (apply) to join Fonterra, or not, depending on their needs/wants. But Fonterra is DEF owned by the farmers, not by taxpayers.
*I’m sure we call this “industry capture” look at how their market dominance both makes us proud and causes unease in relation to the cost of a bottle of milk.

>But as we specialised, blacksmiths, millers etc, this had to morph into barter/trade and along with that our sense of reciprocal transaction morphed into contract.

I don’t think specialization would be the driver. The spear maker was a specialist, after all, as was the hunter. The driver would have been the size of the social organization. A blacksmith could perfectly easily operate on credit, getting paid in seasonal vegetables in return for farming equipment and repairs, for instance. Businesses now can, for that matter. We still operate that way for a great deal of our lives, with friends and family.

But if the blacksmith is working in a town, and unlikely to even see people again who turn up for goods or repairs, they basically can’t trust that their credit will be repayed. Nor are they likely to remember every customer, if they deal in something commoditized, with hundreds of transactions per day. So money, barter and contracts become useful (without making unsecured credit useless).

To be ultra specific: Fonterra as an entity would not exist in it’s current form without specific legislation enacted by Parliament. This does not necessarily preclude the possiblity of a Fonterra like co-operative construct being created sometime, someplace by some farmers to maximise their utility.

QtR – The discussion is not specific to contracts though. You made grand statements @51 “States don’t facilitate markets. States inhibit and distort markets.” You then provide examples relating to contract that contradict this position, given that your examples of non-state enforced contracts took place within a construct created by the state.

I was merely pointing that out.

Most of the financial instruments that were traded at that time were prohibited by the state and so most of the contracts took place without state enforcement.

You could say the same of drug peddling today.
It doesn’t make dealers merchant princes or paragons of laissez-faire capitalism. It makes them opportunists, not unlike 17th century stockbrokers.
And it certainly doesn’t preclude the fact that some degree of market regulation is in force for good reason – distortion sure, but better than being knee deep in junkies.

@68 Agreed, for the most part, but I wouldn’t say that the “invisible hand” never exists under laissez faire. Safer to say that it’s just not the case that it’s guaranteed to exist, that highly unbalanced situations can and do occur. If fixing those situations is “distorting the market” then so be it. Distorting the markets is therefore not always bad. But sometimes they work fine, requiring no intervention.

Gregor – What one may call facilitation another may call distortion. Go back to Neil’s original comments which I was responding to. Quote: “But in larger systems, as Gregor W above mentioned, individuals often cannot mediate directly and require an extrenal agency that can be trusted upon to enforce contract law, ownership rights etc”.

I have provided numerous examples of larger systems that in the case of 17th century stock exchange in Amsterdam did not require an external agency for contract enforcement, or as in the case of the medieval law merchant and international arbitration, where contracts are enforced by external agencies which are not the state. So yours and Neil’s argument that the state is necessary for complex trade does not hold water.

Order in human society is emergent. The evidence is clear markets, property rights, and law can exist without the top-down imposition of order by an organization which claims a territorial monopoly on the legitimate use of physical force (violence).

Gregor – What one may call facilitation another may call distortion. Go back to Neil’s original comments which I was responding to. Quote: “But in larger systems, as Gregor W above mentioned, individuals often cannot mediate directly and require an extrenal agency that can be trusted upon to enforce contract law, ownership rights etc”.

I have provided numerous examples of larger systems that in the case of 17th century stock exchange in Amsterdam did not require an external agency for contract enforcement, or as in the case of the medieval law merchant and international arbitration, where contracts are enforced by external agencies which are not the state. So yours and Neil’s argument that the state is necessary for complex trade does not hold water.

Order in human society is emergent. The evidence is clear markets, property rights, and law can exist without the top-down imposition of order by an organization which claims a territorial monopoly on the legitimate use of physical force (violence).

>The evidence is clear markets, property rights, and law can exist without the top-down imposition of order by an organization which claims a territorial monopoly on the legitimate use of physical force (violence).

It *can* but that doesn’t mean it *will*. So none of that is a good argument against states and order and market controls.

Sure. But my position, as described by Ben, is that distortion is not necessarily a bad thing. If fact it is often desirable to ensure the smooth, real world market functionality rather than the ideological, unproven (and probably unproveable) dreamland of the perfect, unfettered market.

I have provided numerous examples of larger systems….

I won’t quibble on three examples being classified as “numerous”, but if you can find an example in today’s highly complex business environment rather than one 300+ years old, I would take the proposition more seriously.

The evidence is clear markets, property rights, and law can exist without the top-down imposition of order by an organization which claims a territorial monopoly on the legitimate use of physical force (violence).

Sure, but to what degree can it exist effectively without top down imposition? In other words, what is your yardstick for this clear evidence in a modern context? (and I’m not talking theory; concrete examples)

@Ben

You are right. I didn’t mean to imply the invisible hand specifically might not have existed under 17th century and mediaevel conditions.

To be perfectly honest, I don’t actually believe the invisible hand exists as a concept.
Self regulation of the market is, IMO, a comforting fairy tale told to first year BCom students and unfortunately, propagated as gospel thereafter.

“Order in human society is emergent. The evidence is clear markets, property rights, and law can exist without the top-down imposition of order by an organization which claims a territorial monopoly on the legitimate use of physical force (violence).”

Sure – in the context of small, discrete communities, wherein the members all know each other well (and may well be bound by kin relationships) and strangers are immediately identifiable, and penalties for failing to follow community rules involved a refusal-to-treat (the practice of “outlawing”). But is that really applicable to an interconnected world, wherein travel (at least within national borders) is simple and most people don’t know who lives more than 2 doors either side of them?

I won’t quibble on three examples being classified as “numerous”, but if you can find an example in today’s highly complex business environment rather than one 300+ years old, I would take the proposition more seriously.

There are many more historical examples in the paper I linked to above Public choice and the economic analysis of anarchy. One contemporary example of which I have already mentioned is international arbitration.

Sure, but to what degree can it exist effectively without top down imposition? In other words, what is your yardstick for this clear evidence in a modern context? (and I’m not talking theory; concrete examples)

I don’t know what would suffice to be clear evidence, however, there is plenty of empirical substantiation of the theory. [Indices of economic freedom](http://www.freetheworld.com/release.html) are consistent in demonstrating the link between economic freedom and greater human well-being. Whether it is poverty reduction, human development, income, employment, they all positively correlate with economic freedom.

Look at the historical record of countries that have followed free market reforms in recent times China, India, South Korea, Brazil, Hong Kong. It has resulted in the fastest elimination of poverty in human history. Now look at the numerous examples of societies that became significantly more statist and implemented state socialist economic policies and the human misery that resulted – Cambodia, North Korea, Somalia under the Barre regime, other past Marxist-Leninist African regimes e.g., Benin, Ethiopia, Maoist China and of course the Soviet states. Mass poverty, famine, torture, slavery, and mass executions were all commonplace among them.

This is a far cry from the radical anti-market sentiments expressed by David Cunliffe and Danyl.

Safer to say that it’s just not the case that it’s guaranteed to exist, that highly unbalanced situations can and do occur. If fixing those situations is “distorting the market” then so be it. Distorting the markets is therefore not always bad. But sometimes they work fine, requiring no intervention.

It maybe true that highly unbalanced situtations can occur, no system is perfect, but that it does not follow that state intervention is preferable when that intervention may more often than not do more harm than good. That is my main point, not simply that the state is unnecessary for an ordered society, but that it does more harm to society than it does good. One can look at the complex, constantly growing web of government regulations designed to constrain and redirect modern capitalism that contributed to the recent financial crisis, from canonizing the rating’s agencies judgement in legislation, protecting them from competition, to encouraging mortgage lending to low income borrowers.

Furthermore, to belief that the state merely responds to such situations merely for the common good or some other public spirited reason is one that flies in the face of history and modern scholarship. It is the central insight of public choice economics that the government does not merely manage affairs for the benefit of society as a whole. Such romantic notions of politics have been stripped away. One can look, as an example, at the rise of government law enforcement in England (linked to above) which was not out of public interest, but to consolidate state power and because the kings saw the court system as a potential source of revenue.

Sure – in the context of small, discrete communities, wherein the members all know each other well (and may well be bound by kin relationships) and strangers are immediately identifiable, and penalties for failing to follow community rules involved a refusal-to-treat (the practice of “outlawing”). But is that really applicable to an interconnected world, wherein travel (at least within national borders) is simple and most people don’t know who lives more than 2 doors either side of them?

There are a number of examples of trade between heterogeneous groups without state enforcement, the creation and enforcement of law between members of different social groups, and statelessness in large societies. They are provided in the paper I linked to above: Public choice and the economic analysis of anarchy. That is why I linked to it. I do encourage you to read it.

Look at the historical record of countries that have followed free market reforms in recent times China, India, South Korea, Brazil, Hong Kong. It has resulted in the fastest elimination of poverty in human history. Now look at the numerous examples of societies that became significantly more statist and implemented state socialist economic policies and the human misery that resulted – Cambodia, North Korea, Somalia under the Barre regime, other past Marxist-Leninist African regimes e.g., Benin, Ethiopia, Maoist China and of course the Soviet states. Mass poverty, famine, torture, slavery, and mass executions were all commonplace among them.

An all powerful, all conrtrolling State has proved to be a disaster but that’s an argument against an all controlling State which will envitably be unable to make all the deccions in an economy with any efficiency even if they didn’t inevitably become oligarchies anyway. Socialism – good idea, wrong sepcies – as E O Wilson observed.

But where there is no State there’s inevitably tribal warfare, amongst other less desirable features.

Actually, fuck that noise QTR, you know what the swiftest reduction in human misery was? It was Nehru’s India, which ended the periodic famines that ravaged India, especially under the free market regimes of the British Raj. (See also Ireland.)

>It maybe true that highly unbalanced situtations can occur, no system is perfect, but that it does not follow that state intervention is preferable when that intervention may more often than not do more harm than good.

Correct. By definition of the words good, harm and preferable. However, when it would do more good than harm it is preferable. Again by definition. So much for the tautological arguments.

>That is my main point, not simply that the state is unnecessary for an ordered society, but that it does more harm to society than it does good.

Yup, and you’re not especially convincing on either point. You are taking an extreme position, and arguing for it by contrasting it to another extreme position. No one disputes one of the extreme positions can be very bad, but that doesn’t convince anyone about the other position, indeed, it makes a better case against extreme positions.

Actually, fuck that noise QTR, you know what the swiftest reduction in human misery was? It was Nehru’s India, which ended the periodic famines that ravaged India, especially under the free market regimes of the British Raj.

India under Nehru and proceeding administrations were heavily influenced, to the great harm of their citizens welfare, by Fabian Socialist ideas. They did make progress on food security, but this time coincides with the green revolution so it is clearly not all attributable to them. India largely stagnated until starting modestly with Rajiv Gandhi’s reforms in the eighties and then taking off after the 1991 economic crisis and the neo-liberal reforms that followed. The reforms included ending industrial licensing to allow private enterprises to operate in industries they were previously barred from, disinvestment, which was a policy of partial privatisation of state enterprises, abolishing import licenses, reducing tariffs, and liberalising foreign investment. India reduced poverty from 60% of the population to 42% between 1981 and 2005. Not as impressive as the progress China made with economic liberalisation of its economy, but still impressive and combined it is the fastest elimination of poverty in world history.

Yup, and you’re not especially convincing on either point. You are taking an extreme position, and arguing for it by contrasting it to another extreme position. No one disputes one of the extreme positions can be very bad, but that doesn’t convince anyone about the other position, indeed, it makes a better case against extreme positions.

The indices of economic freedom, of the Frasier Institute’s I linked to, provide ample evidence that greater economic freedom leads to increasingly positive outcomes to human welfare and development. These are comparisons across nations not simply extremes.

But where there is no State there’s inevitably tribal warfare, amongst other less desirable features.

This is false. The historical evidence shows that stateless places like Zomia, Ireland, Iceland, American West, New Amsterdam, colonial Pennsylvania in history did not simply slip into tribal warfare and were stable for relatively long periods of time. Lets remember that 200 million people were killed by their own government in the 20th century and that does not include the millions more who perished in wars between states.

Like in Somalia, the anarcho-capitalist’s paradise.

It is not. But it does provide another example for comparative institutional analysis. The comparison to make is not between Somalia and western nations, but Somalia during the socialist regime of Siad Barre and Somalia under a relative statelessness. Siad Barre ran a brutal and inhuman regime which tried to impose “scientific socialism” on Somalia which reduced Somalia to the poorest nation on earth. In comparison its relative statelessness has actually been an improvement. See this paper Better Off Stateless: Somalia Before and After Government Collapse

Do you think David Cunliffe understands Adam Smith when claims that “Friedman revived a belief in the “invisible hand” of the market. It was a fairy tale that Adam Smith had said a century earlier would automatically deliver the best of all possible economic worlds”. As Paul Walker points out “Adam Smith NEVER said that!” and “Smith believed there were many reasons for markets to failure and thus many reasons for government intervention”.

No actually Quoth, go read Sen on this one. Nehru’s India did not just make progress on food security; it eliminated the periodic famine problem. (And again, following Sen remember that famines are not caused by absolute scarcity of food.) Anyhow, given your clear religious beliefs and the rather boring trotting out of the usual suspects of the net-libertarian, yawn.)

QtR: “It is not. But it does provide another example for comparative institutional analysis. The comparison to make is not between Somalia and western nations, but Somalia during the socialist regime of Siad Barre and Somalia under a relative statelessness. Siad Barre ran a brutal and inhuman regime which tried to impose “scientific socialism” on Somalia which reduced Somalia to the poorest nation on earth. In comparison its relative statelessness has actually been an improvement. See this paper Better Off Stateless: Somalia Before and After Government Collapse”

An improvement, if you’ve got the wherewithal for a good supply of razor wire and rifle-toting bodyguards, just in case the local warlord wants a cut. And just ask any sailor who’s fought off, or been kidnapped by, pirates off the Horn of Africa.

Despite Sen’s use of India and China as the yin and yang of his thesis on democracy and famine, the empirical evidence indicates that famines did not appear to ‘abruptly’ end in India following the establishment of a pluralist political system in 1947. Instead, much empirical evidence points to the continued existence of famines in India following independence; in particular, the states of Bihar (1966), Maharashtra (1970–1973), and perhaps even Orissa (1990s), experienced famine-like conditions….

Just preceding the 1967 national elections, India’ second most populous state, the state of Bihar, appears to have experienced a major famine. Before 1967, Bihar suffered less than normal food grain production for 2 years in a row due to a disastrous combination of drought in the south and floods in the north. More than half of the districts in Bihar produced less than 50 per cent of the normal output, and more than a quarter of the population had to survive on less than 1800 calories per day (Myhrvold-Hanssen, 2003, p. 3). The impact on mortality was clearly discernable. Based on the Annual Report on Vital Statistics of Bihar, the mortality rate peaked in 1967 with a rate that was 22 per cent higher than in 1966 and 34 per cent higher than in 1968. For some of the worst affected districts, the Gaya district for instance, the mortality rate in 1967 was in fact three times the mortality rate the following year. If 1966 and 1968 are taken to be normal years, then the excess mortality rate in 1967 was in the order of 3.5/1000/year for the whole of Bihar. According to the Government of Bihar, 34 million persons were reportedly affected by the famine, of which 13.4 million were in the famine area (Brass, 1986, p. 247). In other words, the casualties of the famine are likely to be counted in tens of thousands. This is supported by reports of ‘eye-witness accounts of people eating wild leaves and roots, picking pieces of grain from the dust around railway sidings, undergoing appalling skeletonization, and even starving to death’ (Drèze, 1999, p. 111). The famine is noteworthy because it appears to have evolved under democratic rule. Furthermore, I will argue that the crisis did not occur despite political action to remedy the famine, but that the lack of an adequate response was caused at least in part by democratic institutions that exacerbated the situation.

“In the world economy, the major trend of our time is the rise of nationalist state capitalism, not the disappearance of national economic boundaries that was predicted by the prophets of globalization like Thomas Friedman following the end of the Cold War. When the world economy collapsed in 2008, leading industrial countries rushed to bail out national firms like America’s GM and Germany’s Opel, giving the lie to the claim that major corporations no longer had national identities. Instead of liberalizing its economy as it developed, China has made its state-owned companies more rather than less important. Most of the world’s energy companies, and a number of major shipping and aerospace industries, are state-controlled. The response in the U.S. has been growing economic nationalism, which is tapped by presidential candidates like Obama and Romney who call for defending and promoting American industry — at least when they are running for office.”

After all, it seems odd to hold up China/South Korea/Brazil/et al as examples of the withering away of the state/triumph of the market. Sure, they may be “less statist” than they were 20-30 years ago, but why aren’t their relative successes due to the particular mix of government control and market-based information systems they’ve adopted? It seems to be little more than an article of faith that the “good” results must be because of the market bit of the mix, while any “bad” results of market activity must be due to government meddling (see the frantic efforts to show the GFC was all the fault of regulators). And they may be better societies to live in than North Korea or pre-statelessness Somalia, but that sets the bar pretty low … after all, the former Yugoslavia also was a better society than North Korea. And finally, it’s questionable how far we can extrapolate along any trend towards the greater use of markets … especially when the history of the last 5 years is pretty much counter to it.

Furthermore, I’d be more convinced by an argument that references places like Norway or Germany or Sweden, rather than focusing on models of developing economies. How will theoretical anarchism deliver me a better life than social democracy within a liberal democratic political order in which the rule of law is secure? After all, my choices aren’t limited to between China and North Korea, are they?

That was substantive enough. Noting that a discussion about David Cunliffe’s speech turned into a soapbox for yet another tedious lecture series about the merits of free markets. As Sacha said, it’s had it’s 1% now.

Only if you were trapped in the shower with your hair full of shampoo and with just the shower curtain between you QoT comfortably ensconced on a chair he/she had thoughtfully brought along for the occasion.

Only if you were trapped in the shower with your hair full of shampoo…

…and you’ve reached the point where you are calculating whether you just might be able to squeeze through the bathroom window without making to much noise, and even though you’ll find yourself on the street buck nekkid and locked out of your own house, you figure it’s worth it.

“Look at the historical record of countries that have followed free market reforms in recent times China, India, South Korea, Brazil, Hong Kong. It has resulted in the fastest elimination of poverty in human history. Now look at the numerous examples of societies that became significantly more statist and implemented state socialist economic policies and the human misery that resulted – Cambodia, North Korea, Somalia under the Barre regime, other past Marxist-Leninist African regimes e.g., Benin, Ethiopia, Maoist China and of course the Soviet states. Mass poverty, famine, torture, slavery, and mass executions were all commonplace among them.”

BS. This so called “fastest elimination of poverty in human history” was not achieved, and could not have been achieved, by those countries without the manipulation and exploitation of their economies, environmental and human capital by western ‘civilisation’.

Sadly we are a short lived and apparently to the nth degree, an astronomically short sighted species. A sessile malignant cancerous blight on possibly the only living world in our little corner of the galaxy (fermi paradox) if not universe. We have raped and pillaged this planet and its wondrous and unique life; and we continue to do so despite a vast and incontrovertible litany of scientfic evidence. This societal cognitive dissonance illustrates a profound sickness if not within the human condition certainly within the way we choose to construct our societies and live our lives.

“Unfortunately, the way we are living now is not sustainable. We have taken too much land out of the natural cycles in order to grow our own food on it. We are systematically destroying the world’s major fish populations through overfishing and pollution. We are also driving most of the larger land animals to extinction.” Gwyne Dyer ‘Global Civilisation: The Options’

This is the legacy of your unfettered ‘free’ market. And may well mean the extinction of the only concious life form in this universe.

This is the legacy of your unfettered ‘free’ market. And may well mean the extinction of the only concious life form in this universe.

Luke (or is it Gareth Hughes?) why should you care? If mankind is just “a sessile malignant cancerous blight” why should you care about its extinction or its impoverishment? Logically you wouldn’t. So your anti-humanist green argument leads you down a dead end.

After all, it seems odd to hold up China/South Korea/Brazil/et al as examples of the withering away of the state/triumph of the market. Sure, they may be “less statist” than they were 20-30 years ago, but why aren’t their relative successes due to the particular mix of government control and market-based information systems they’ve adopted? It seems to be little more than an article of faith that the “good” results must be because of the market bit of the mix, while any “bad” results of market activity must be due to government meddling

It is not a mere article of faith. There is empirical evidence to substantiate it. The article of faith is to believe that a constantly changing economy as that in China has stumbled upon a magic formula of private to state enterprise. Private enterprises are more productive than SOEs in China. The highest living standards and fastest growth in China are in those regions dominated by private business, rather than SOEs (e.g., Zhejiang). The slowest growth and lowest living standards are in those regions dominated by the state. The state sector contrary to the the assertions in your linked to article has become less important not more accounting for a smaller and smaller percentage of China’s output as the largest privatisation effort in world history took place in China as more than 90,000 firms were privatised. See the paper: The environment of productive entrepreneurship: evidence from Asia and the pacific rim.

The lion’s share of economic growth in China during the last 25 years has occurred in the newly emerged non-state sector. Reforms have allowed new forms of ownership, such as town and village enterprises, private firms, foreign invested enterprises, and subsidiaries of foreign corporations. In 1978 this non-state sector accounted for less than one-third of industrial output, but as freedom in this sector expanded, growth exploded. The non-state sector now accounts for more than two-thirds of industrial output (Dorn 2005: 2). In 2004, 3.8 million privately owned enterprises accounted for 60 percent of the nation’s foreign trade (Dorn 2005: 2). Major changes in trade policy have also helped fuel the private sector’s growth. Only 12 state-owned enterprises had the right to import and export in 1978, but by 2001 more than 35,000 firms could do so (Dorn 2005: 13).

Some regions of China have opened up to private enterprise more than others. Starting in the mid-1980s, more economic freedom and foreign trade were allowed in special economic zones created in selected coastal cities. Most of the more economically free regions in China still tend to be coastal, as shown by the “Marketization Index” for the various regions of China created by Fan, Wang, and Zhang (2001). They rank regions according to how big the government is, what the firm ownership structure is like, how many trade barriers and price controls there are, the development of factor markets, and how secure the legal framework is. Dorn (2005: 16) finds that regions with higher scores on the marketization index are those that have grown the fastest. For example, from 1990-95 Guangdong, Zhejiang, and Fujian grew at an annual rate of more than 20 percent. In these regions, state-owned enterprises account for only a small fraction of output. In contrast, in Heilongjiang, the Nignxia Autonomous Region and Qinghai, where state-owned enterprises are more prevalent, growth was only 7-8 percent per year and this figure is likely overstated because the managers in state owned enterprises are likely to overstate production. Using the overall marketization index, Dorn finds that the GDP per capita in the six coastal provinces that score in the highest quintile on the marketization index is almost three times higher than the provinces in the lowest quintile and is even 70 percent higher than the provinces in the second highest scoring quintile (2005:16).

The evidence from China is overwhelmingly consistent with the notion that improvements in the entrepreneurial environment lead to economic growth. Despite the fact that it is still nominally communist, China has been the biggest pro economic freedom reformer in the region. Most of the growth has occurred in the private sector and those regions that have made greater pro-market reforms.

Looking to the future if China is not to fall into the middle income trap more market liberal reforms are needed.

Sadly we are a short lived and apparently to the nth degree, an astronomically short sighted species.

From E O Wilson, comparing us with the only other eusocial species:

Overall the evolution of ants and termites was slow enough to be balanced by the counterevolution in the rest of life. As a result, these insects were not able to tear down the rest of the terrestrial biosphere by force of numbers, but became vital elements of it…

In sharp contrast, human beings of the single species Homo sapiens emerged in the last several hundred thousand years and spread aroud the world only during the last sixty thousand years. There was not enough time for us to co-evolve with the rest of the biosphere. Other species were not prepared for the onslaught.

From his latest book The Social Conquest of Earth. He argues persuasively for a form of group selction operating in conjunction with inclusive fitness.

Biologists, anthropologists, archaeologists, evolutionary psychologists, and metaethicists are just now starting to accept the sophisticated understanding that FA Hayek had 40 years ago regarding the co-evolution of human culture (faster) and genes (slower) with the unit of selection often being the group. Hayek was actually mocked for that. Now EO Wilson himself (who Hayek critiqued on the point) is spearheading its advancement on the biology side. History vindicates Hayek, per usual.

Interestingly enough Hayek wrote about the co-evolution of human culture and group selection decades ago.

Since first reading The Selfish Gene I’ve been firmly in the inclusive fitness camp but there does seem to be good evidence for a degree of group selection and with advocats such as E O Wilson it’s not possible to ignore.

Not that it bodes well for our species. We’re partly the product of generations of inter-group conflict, little wonder we’re so good at it.

So when Hayek said in The Road to Serfdom “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez-faire capitalism”, we regard that as being holy writ, too?

The more serious point is that, sure, you can mine Hayek for lots of pro-free market sentiments. But he also said lots of things about how governments still have an important role in the economy (which isn’t something Quoth the Raven seems minded to accept). Plus, if you’re going to quote people saying “History vindicates Hayek, per usual”, you might want to consider why it is that Sweden hasn’t devolved into a totalitarian hell-hole, in which individual liberty and freedom of conscience have been systematically reduced as the role of the state in the economy increases. Or why it is that under Thatcher, free-market reforms were combined with an assault on traditional civil liberties (see http://www.inter-disciplinary.net/wp-content/uploads/2011/04/adamsexpaper.pdf).

Indeed, you might want to talk about contemporary advanced industrial democracies in general, rather than drawing all your examples from history or the developing world.

Flashing Light and Gregor you do realize you can quote thinker X on position A and agree with position A even if you disagree with other positions X holds… right? You don’t have to agree with a thinker 100% to draw insights from them. If you are actually interested on the intersection of liberal anarchism and Hayek I suggest this paper on Hayekian Anarchism.

Since Hayek’s time classical-liberal scholarship has become much more anarchist.

Regarding Hayek’s “Road to Serfdom” for a more sophisticated view of what scenario would play out (and what actually has) see anarcho-liberal Anthony de Jasay’s idea of a “churning society”.

The more serious point is that, sure, you can mine Hayek for lots of pro-free market sentiments. But he also said lots of things about how governments still have an important role in the economy (which isn’t something Quoth the Raven seems minded to accept).

But a much smaller role than any of my fellow interlocutors in this discussion would be wiling to accept and even less still than those who are as illiberal and anti-market as David Cunliffe. Hayek expresses far more than just “pro-free market sentiments”. Hayek was a champion of market liberalism against government control and made devastating arguments against the latter, but he was not an anarchist.

I do not wish you to walk away with too jaundiced a view of myself. If there was a switch that would turn off the state today I would not switch it, but I do believe we should progressively move towards a more liberal society and I do believe that anarchic order is compatible with (and would protect better) a liberal society. I do believe the state is an unnecessary institution which does more harm than good in society, but not that it is the source of all ill in society.

Or why it is that under Thatcher, free-market reforms were combined with an assault on traditional civil liberties.

A nation’s economic freedom correlates positively with a higher degree of political rights and civil liberties. Liberties whether labeled under economic, social, civil or political do not inhabit separate spheres they overlap and are intertwined. For instance, the banning of pornography would not only abrogate freedom of expression, but it also bans economic activities; the sale, production, distribution and ownership of a product. It is this point that illiberals like David Cunliffe who claims he does not favour regulating the lives of ordinary New Zealanders (he might like to check his party’s alcohol policy in that respect), but is more than willing to drastically increase the regulatory burden in their economic lives, however, you cannot simply separate out liberties into separate spheres without influence on each other.

“…you do realize you can quote thinker X on position A and agree with position A even if you disagree with other positions X holds… right?”

Of course. But if you didn’t actually mean to endorse the broad-brush claim ““History vindicates Hayek, per usual”, then perhaps don’t approvingly cite it.

As for the correlation between economic and civil/social freedom … of course there is a link, in the sense that if you factor in totalitarian dictatorships that seek to control all aspects of a society’s activities, that’ll result in minimal economic or other forms of freedom. But once you move outside of such societies (and I don’t think anyone here is arguing in favour of a return to Stalinist central command economies), the link becomes pretty tenuous. So, if you look at the Heritage Foundation’s top two “freeist economies” in the world, they are Hong Kong and Singapore … hardly beacons of individual liberty. And you can have pro-free market regimes that reduce civil liberties (Thatcher) and more regulationist regimes that increase them (see post-Franco Spain or post-Pinochet Chile). The point was that Hayek predicted that increased government intervention in the economy/redistributive policies inevitably would result in the erosion of classic civil and political liberties … which just didn’t turn out to be true post WW-2.

The final point I’d note is that you continue to duck a challenge that several commentators have put to you. Moving beyond your reliance on historical and models of developing economy examples, how is what you are arguing relevant to advanced liberal-democratic societies … and in particular, how can you show that your preferred model of theoretical anarchism means that keeping on doing what we have been doing in New Zealand will create a better life for the average punter than (say) German or Norwegian social democracy will? Because Cunliffe doesn’t seem to be arguing that we should become like North Korea or the like (in which case, using it as an example would make sense). Rather, he’s calling for the government to do things that in other nations comparable to New Zealand have led to better economic outcomes than we have seen here … why is he wrong about that?

“The point was that Hayek predicted that increased government intervention… inevitably would result in the erosion of classic civil and political liberties … which just didn’t turn out to be true post WW-2.”
Ex-squeeze me? You are aware of the imposition of the European Union model against the wishes of the European people, aren’t you? Do you know how the man or woman on the european street can influence the policies adopted by the EU and then imposed down via national governments? No? Well, neither do they.

As for the correlation between economic and civil/social freedom … of course there is a link, in the sense that if you factor in totalitarian dictatorships that seek to control all aspects of a society’s activities, that’ll result in minimal economic or other forms of freedom.

What totalitarian dictatorships are you referring to? North Korea is not included in the Frazer Institute’s economic freedom rankings.

Of course it is more than a simple correlation as they are interlinked which was my main point. As I argued, liberties whether they are labeled civil, social, or economic do not simply inhabit separate spheres.

The final point I’d note is that you continue to duck a challenge that several commentators have put to you. Moving beyond your reliance on historical and models of developing economy examples, how is what you are arguing relevant to advanced liberal-democratic societies …

You mention Germany and Norway (economies which have many dissimilarities), but you assiduously fail to mention what are glaring examples of the instability that social democracy creates, that is those nations on Europe’s periphery e.g., Greece, Spain, and Portugal. Nations which have a smaller degree of economic freedom than that enjoyed by other central Western European nations.

The empirical evidence for wealthy nations is that government size negatively correlates to economic growth. A Schumperterian point could be made here about the productivity of capitalism allowing government growth (I think for various reasons that is something that is increasingly breaking down and there is a mega-trend towards decreasing statism).

Like those commenters on this site who seem to forget we live in a world in which the Berlin Wall has fallen, you seem to forget that it is not the 1970s anymore and Scandinavian nations, like Sweden, have made market liberal reforms in the many areas, especially in the 1990s, to address the economic instability, and sclerotic growth they were experiencing. The market orientated policies that have been pursued in nations like Sweden is a point explicitly made in the paper on government size and growth linked to above. Policies unlikely to be pursued by someone as illiberal and ideological as David Cunliffe

Rather, he’s calling for the government to do things that in other nations comparable to New Zealand have led to better economic outcomes than we have seen here … why is he wrong about that?

What specifically is he calling for us to do (except not partially privatising some assets)? Amidst the polemic of his speech there is little in the way of policy.

“You mention Germany and Norway (economies which have many dissimilarities), but you assiduously fail to mention what are glaring examples of the instability that social democracy creates, that is those nations on Europe’s periphery e.g., Greece, Spain, and Portugal. Nations which have a smaller degree of economic freedom than that enjoyed by other central Western European nations.”

So? My point is that there are models of stable liberal democratic societies which mix government intervention in the market and high levels of wealth (and that there are various models thereof, too). I point this out as a corrective to your approach, which treats all “states” as bad and (by implication) variants on North Korea.

“The empirical evidence for wealthy nations is that government size negatively correlates to economic growth.”

Except that isn’t really a fair summation of what that paper says, is it? As the authors themselves say, “Hence, our results do not imply that government must shrink for growth to increase. There is potential for increasing growth by restructuring taxes and expenditure so that the negative effects on growth for a given government size are minimized. Furthermore, countries tend to cluster to institutions that go well together.”

“Like those commenters on this site who seem to forget we live in a world in which the Berlin Wall has fallen, you seem to forget that it is not the 1970s anymore and Scandinavian nations, like Sweden, have made market liberal reforms in the many areas, especially in the 1990s, to address the economic instability, and sclerotic growth they were experiencing.”

Coming from someone who seems unable to remember anything of economic history post 2008, this is a rather funny criticism. But again, yes, the nordic nations are “less statist” now than they were in the 1970s. But they remain far, far “more statist” than New Zealand is. Whose economy would you rather have?

So? My point is that there are models of stable liberal democratic societies which mix…

You are running together liberal and social democracy. What do you want to talk about liberal or social democracy? IMO Liberal democracy is greatly preferable to social democracy.

Except that isn’t really a fair summation of what that paper says, is it?

Of course they go into a lot more detail and correlation is not causation, but It is the explicit results of the paper. “In general, research has come very close to a consensus that in rich countries there is a negative correlation between total government size and growth. It appears fair to say that an increase in total government size of ten percentage points in tax revenue or expenditure as a share of GDP is on average associated with an annual lower growth rate of between one-half and one percentage point.”

I point this out as a corrective to your approach, which treats all “states” as bad and (by implication) variants on North Korea.

Variants on North Korea is hyperbole on your part. As I have already stated I believe states do more harm than good.

In place of voluntary human interaction the state engages in mass coercion (proactive physical violence or threat thereof). The state is a monopoly on mass ideologically-legitimized coercion in a given territory creating an extreme disparity in power. Whereas the market is a positive sum game, politics is a zero sum game. Statism is divisive it divides people into nations and parties with often tragic results. Whereas markets, like language and human civilization, are an example of a bottom-up emergent order states impose top-down order. For peace, prosperity, poverty elimination, and human well-being it would be a net positive if we progressively destatize society.

But they remain far, far “more statist” than New Zealand is. Whose economy would you rather have?

Apples and oranges. New Zealand is an island nation distanced from its trading partners. Scandinavian nations are highly globalized nations sitting in the world’s largest free trade zone. Think of the agglomeration and network effects.

Coming from someone who seems unable to remember anything of economic history post 2008,

Before you were complaining I was using to many historical examples. Make up your mind.

“You are running together liberal and social democracy. What do you want to talk about liberal or social democracy? ”

No I’m not. You’re insisting on there being a rigid difference because you are using the word “liberal” in a very narrow manner that isn’t shared by the vast majority of the users of the term. Which you are welcome to do, but you can’t insist that others must do likewise. Or rather, you can. But we don’t have to listen to you.

“Variants on North Korea is hyperbole on your part. As I have already stated I believe states do more harm than good.”

So it actually isn’t that much of an hyperbole, is it? Sweden/Norway/New Zealand actually are all just slightly less bad versions of North Korea (when placed against a never existed pure theoretical free associating anarchist utopia, of course). Kind of like how Ghandi is a slightly less evil Hitler, when considered in the light of Jesus Christ the Lamb of God.

“Apples and oranges. New Zealand is an island nation distanced from its trading partners. Scandinavian nations are highly globalized nations sitting in the world’s largest free trade zone. Think of the agglomeration and network effects.”

So the external impediments that a nation faces can stop it prospering, irrespective of how much it removes the costs of doing business within its own borders? This might almost make you think that “an island nation distanced from its trading partners” might need to devise policies to overcome those comparative disadvantages … maybe something like this http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10801645?

“Before you were complaining I was using to many historical examples. Make up your mind.”

Nope. I complained that your choice of historical examples tended to be so far removed from contemporary policy concerns as to be apples and oranges. However, I’ve seen your posts on why “the markets” weren’t responsible for anything that those in the markets did during the GFC, so I won’t poke that dog again.

“the fucks who made out like bandits at the expense of millions aren’t doing any jail time.” Eh? In NZ there are a number of such bandits starting their jail time, although many are getting community service or home detention.

In the US, the large powerful govt sided with the bandits and pumped taxpayer money into the bandits’ operations. I would be happy for both sets of bandits to do jailtime. Thankfully, I am not a US taxpayer, so it prob concerns me less.
QtR talks about how states f**k things up. Just look at what we are expected to give up to US trade negotiators without getting dairy, lamb and beef market access in return. And all at the expense of US consumers: Free trade would be great for our farmers and their consumers.

” Eh? In NZ there are a number of such bandits starting their jail time, although many are getting community service or home detention.

Sure, but fraudsters like Petravic are small fry and his conduct is covered by statute.

I’m talking about the wholesale, perfectly legal profiteering, casino speculation and outright looting taking place worldwide with the complicity of politicians, bureaucrats and central bankers (partly due to the revolving door policy of employment and resultant regulatory capture), that has brought the world economy to its knees and impoverished hundreds of millions of people.

“I’m talking about the wholesale, perfectly legal profiteering, casino speculation and outright looting taking place worldwide with the complicity of politicians, bureaucrats and central bankers (partly due to the revolving door policy of employment and resultant regulatory capture), that has brought the world economy to its knees and impoverished hundreds of millions of people.”

Um, so crooks hand-in-hand with the powerful state (you even use the words “regulatory capture”). Are we arguing, or just shouting across each other like Andrew Mulligan and Mark Richardson?

I believe the state is not inherently ‘bad’ as an apparatus, but that without appropriate constitutional and regulatory safeguards in place is often used as the apparatus that facilitates vested interests to enrich themselves.

QtR (and I think you?), regard the state apparatus as having some kind of malevolent agency in of itself.

“You are aware of the imposition of the European Union model against the wishes of the European people, aren’t you? Do you know how the man or woman on the european street can influence the policies adopted by the EU and then imposed down via national governments? No? Well, neither do they.”

A comment from Diana Johnstone that highlights the friction between European national and supra-national governance and illustrates why constitutional checks and balances at the nation-state level are crucial:

“It is a major paradox that the post-World War II ideology of anti-fascism has played a major role in killing democracy.

This ideology, which finds its most respectable reference in the writings of Hannah Arendt, posits that the masses, when plunged into deep economic trouble, will readily follow demagogues who find scapegoats (usually Jews) and impose some sort of “fascism”. This ideology underlies the constant denunciation as “populism” of any criticism of banks and finance capital. Indeed, any expression of sympathy for the needs of ordinary people may be condemned these days as “populism”, regarded as the first step toward “fascism”. The result of this haunting fear has been to support every possible measure to discredit and weaken “the state” as the source of all evil. This ideology has been particularly strong in France. Generations of the left in France have hailed European unification as the answer to the threat of fascism, since it weakens the nation state. The EU is designed to prevent any excess of nationalism or populism, by moving decision-making to the European level.

With the current financial crisis around the euro, this process has reached fruition. There is now no important decision that can be made on the national level. A collateral damage of this achievement is the end of meaningful electoral democracy. Demagogues may rant and the people may riot, but they are totally powerless. As are the peaceful voters.

The common currency was conceived by many pro-European ideologues above all as a mechanism to force a European political unity. This is happening, but in a far more unpleasant way than promised. National sovereignties are being destroyed, but national resentment is growing. There is no “European common spirit” to match the European common currency and reconcile euro-rich Germans with euro-poor Greeks.”

So it’s not to say that the state is a ‘bad thing’, but that a weak state that doesn’t represent the will of its electorate, or has allowed its traditional responsibilities to be subsumed by an undemocratic entity (whether that be supra-national like the EU, or international like the WTO) is a ‘bad thing’.

“Luke (or is it Gareth Hughes?) why should you care? If mankind is just “a sessile malignant cancerous blight” why should you care about its extinction or its impoverishment? Logically you wouldn’t. So your anti-humanist green argument leads you down a dead end. ”

Cheers for the comparison to such an admirable individual; sorry to disappoint but no cigar.

I did get a bit high’n’mighty – have recently been guilt tripped by “if you’re not outraged you’re not paying attention” ;p

I suppose I get a bit upset when I read shit like “According to a 1998 survey of 400 biologists conducted by New York’s American Museum of Natural History, nearly 70 percent believed that they were currently in the early stages of a human-caused extinction, known as the Holocene extinction. In that survey, the same proportion of respondents agreed with the prediction that up to 20 percent of all living populations could become extinct within 30 years (by 2028). Biologist E. O. Wilson estimated in 2002 that if current rates of human destruction of the biosphere continue, one-half of all species of life on earth will be extinct in 100 years. More significantly the rate of species extinctions at present is estimated at 100 to 1000 times “background” or average extinction rates in the evolutionary time scale of planet Earth.”

“So it’s not to say that the state is a ‘bad thing’, but that a weak state that doesn’t represent the will of its electorate, or has allowed its traditional responsibilities to be subsumed by an undemocratic entity (whether that be supra-national like the EU, or international like the WTO) is a ‘bad thing’.”

I agree, I can’t see how my life would improve with the lack of a government. But I can see how my life could improve if, for example, they allowed me to sell alcohol in my shop and not have to keep it in a separate shop next door.

PS don’t leave NGO’s out of the “regulatory capture” equation. Just look at how many western countries are going down the carbon-trading/taxing route on the basis of IPCC reports that rely on an alarming number of NGO assertions on the effect of AGW. In the meantime, we lose focus on real issues like clear-felling, poaching and dairy effluent.

I agree, I can’t see how my life would improve with the lack of a government. But I can see how my life could improve if, for example, they allowed me to sell alcohol in my shop and not have to keep it in a separate shop next door.

Sure; my life could improve with the addition of a new Bentley in my driveway facilitated by a basement full of Indonesian indentured labour making sneakers for 20c a day, but them’s the breaks.

Sometimes we need to make these little sacrifices to live in a civil society.

If I just keep trying the same thing, the outcome is bound to change!
——————————————————————————————
Um, apples and oranges: you want to make slaves of the Indonesians (i.e. give them no choice), whereas I just want to run my business in an economically appropriate way. Instead, I am made a “slave” of someone’s weird idea that alcohol and ice cream can’t be sold together (however, see exemptions and restraints that allow supermarkets to do it, but not your cuddly, lovable, local merchant). So this regulation forces me to pay two rentals instead of one, reducing the chance that I can trim the price of my ice cream for the benefit of my wallet and my customers. So this little regulation (and billions like it) make things in NZ more expensive for everyone, without altering outcomes:
Excise taxes doesn’t cure alcoholism, they just punish those who like a glass of wine with their evening meal.
Our ETS doesn’t cure AGW, just makes it even more difficult for those on low incomes to pay the power bill or fill the car. (Oops, sorry, I forgot: it helps stop bleeding hearts from bleeding, or something.)

All these “little sacrifices” add up. Next time you buy your favourite bottle of pinot, spare a thought for the price: if it wasn’t so expensive, you could donate EVEN MORE of your hard earned income to charity. Instead, those taxes are being used to pay an annuity to Jim Bolger, Helen Clark and, soon, John Banks. :^)

So the external impediments that a nation faces can stop it prospering, irrespective of how much it removes the costs of doing business within its own borders? This might almost make you think that “an island nation distanced from its trading partners” might need to devise policies to overcome those comparative disadvantages … maybe something like this

No matter what policies our country pursues, our relative remoteness and small internal market, will have an effect. It is a point of difference between us and certain other nations you may want to compare us to.

Something like what? You have linked to another David Cunliffe polemic and in true Cunliffe style there is little in the way of specifics. “Most Kiwis want a lot more “can do” from their government” and “…a positive partnership between government and business” are not specific policies just platitudes.

QtR (and I think you?), regard the state apparatus as having some kind of malevolent agency in of itself.

No, the state is entirely human. It is the incentive and calculation problems of that (to use Barack Obama’s words) which sets states apart, a monopoly on violence, create. I’ll allow someone more articulate than myself to explain.

In reality, government is merely a group of individual human beings with their own individual incentives, just as human as everyone else. Even if the government nominally has a Constitution or axiomatic code, it is still controlled and enforced entirely by human beings. The Constitution is a merely a document. It will not reach out its papery appendage and restrain government. The same principles that predict how life and human civilization emerge, and how the government will emerge, also predict how individuals given disparate violent power by the masses as a result of being seen as the government – Constitution or no – will not be able to use it for the benefit of the people and will in fact increasingly harm the people. The humans who control the government have (1) incentives problems and (2) calculation problems.

Humans are primarily self-interested. This does not mean we are completely selfish or egoistical, but rather that empirically (and intuitively) humans tend to want a better life for themselves and their families/friends, tend to like having power, tend to like material well-being, and so on. This is the incentives problem. When you give humans – even well-intentioned statesmen – this power, there are strong incentives for them to seek to keep that power, to use it for their own well-being, to help their friends, to fulfill their ideological identity, etc. They have individual incentives. Public choice economics is the school of economics that deals with the incentives of government officials – and public choice economists tend to be libertarian minarchists or anti-statists for this very reason. Examples include Stanford economist David Friedman (son of Milton Friedman) and George Mason economist Bryan Caplan.

The second major problem is calculation. Even if government officials had no incentives problems and wanted nothing but good for “society,” it is impossible to calculate a priori what is good for society. Economist Kenneth Arrow won a Nobel prize for logically demonstrating this impossibility. First, value is subjective. I don’t know what you value better than you know what you value. And interpersonal values cannot be aggregated outside voluntary revelation of those values. Nobody can calculate needs or demands before the fact. That is why government planned economies like Stalinist Russia and Maoist China starved so many millions of people to death – the government could not calculate the enormous amount of information necessary to match demands to needs via production.

So the external impediments that a nation faces can stop it prospering, irrespective of how much it removes the costs of doing business within its own borders? This might almost make you think that “an island nation distanced from its trading partners” might need to devise policies to overcome those comparative disadvantages … maybe something like this

No matter what policies our country pursues, our relative remoteness and small internal market, will have an effect. It is a point of difference between us and certain other nations you may want to compare us to.

Something like what? You have linked to another David Cunliffe polemic and in true Cunliffe style there is little in the way of specifics. “Most Kiwis want a lot more “can do” from their government” and “…a positive partnership between government and business” are not specific policies just platitudes.

QtR (and I think you?), regard the state apparatus as having some kind of malevolent agency in of itself.

No, the state is entirely human. It is the incentive and calculation problems of that (to use Barack Obama’s words) which sets states apart, a monopoly on violence, create. I’ll allow someone more articulate than myself to explain.

In reality, government is merely a group of individual human beings with their own individual incentives, just as human as everyone else. Even if the government nominally has a Constitution or axiomatic code, it is still controlled and enforced entirely by human beings. The Constitution is a merely a document. It will not reach out its papery appendage and restrain government. The same principles that predict how life and human civilization emerge, and how the government will emerge, also predict how individuals given disparate violent power by the masses as a result of being seen as the government – Constitution or no – will not be able to use it for the benefit of the people and will in fact increasingly harm the people. The humans who control the government have (1) incentives problems and (2) calculation problems.

Humans are primarily self-interested. This does not mean we are completely selfish or egoistical, but rather that empirically (and intuitively) humans tend to want a better life for themselves and their families/friends, tend to like having power, tend to like material well-being, and so on. This is the incentives problem. When you give humans – even well-intentioned statesmen – this power, there are strong incentives for them to seek to keep that power, to use it for their own well-being, to help their friends, to fulfill their ideological identity, etc. They have individual incentives. Public choice economics is the school of economics that deals with the incentives of government officials – and public choice economists tend to be libertarian minarchists or anti-statists for this very reason. Examples include Stanford economist David Friedman (son of Milton Friedman) and George Mason economist Bryan Caplan.

The second major problem is calculation. Even if government officials had no incentives problems and wanted nothing but good for “society,” it is impossible to calculate a priori what is good for society. Economist Kenneth Arrow won a Nobel prize for logically demonstrating this impossibility. First, value is subjective. I don’t know what you value better than you know what you value. And interpersonal values cannot be aggregated outside voluntary revelation of those values. Nobody can calculate needs or demands before the fact. That is why government planned economies like Stalinist Russia and Maoist China starved so many millions of people to death – the government could not calculate the enormous amount of information necessary to match demands to needs via production.

I believe the state isguns are not inherently ‘bad’ as an apparatus, but that without appropriate constitutional and regulatory safeguards in place is often used as the apparatus that facilitates vested interests to enrich themselves.

QtR (and I think you?), regard the state apparatus guns as having some kind of malevolent agency in of itself.

“No, the state is entirely human. It is the incentive and calculation problems of that (to use Barack Obama’s words) which sets states apart, a monopoly on violence, create. I’ll allow someone more articulate than myself to explain.” QtR

Thanks for that; this may come as a surprise but I couldn’t agree more. A classic, recent (entirely unnecessary) example is dear John Banks; my contribution to a Brian Edwards post riposting that Alan Wilkinson chap who mouths off so often in that sty of ignorance – nzherald.co.nz (nothing on ‘kiwi’blog of course; oh how his usurpation of our ‘nick offends me so)

“There was a time when Banks appeared to have strongly held moral convictions. He said (1999) “the casinos want the money of the most vulnerable people”, and invited parliamentarians to “go and watch the Polynesian-Maori office cleaners at 2 o’clock in the morning in the Auckland gambling den, to see what point I am making.”

Two years earlier he was on the same theme, claiming that “the little people of this country have been sucked, hung, drawn, quartered, bled by these people in these casinos”. Kudos Brian Rudman via Denise Roche.

Come 2012 a complete about-face. Moral? Power corrupts; all hail benign AI government implemnting policy only based on the scientific method.”

blah blah blah humans suck; especially at equitable, altruistic, humanist power structures. Still doesn’t mean anarchy is a better option. Surely we can climb out of civilisational infancy via a social democratic method? oh well hoorah for Elon Musk just getting on and accomplishing shit; playing the system, succeeding and sticking it in the face of the incumbent elite power structures. There may be hope yet?